Retail price hikes expected

A second-quarter survey of retail association members in Minnesota, Montana and North Dakota revealed that product prices were up. The inaugural survey was conducted jointly by the Federal Reserve Bank of Minneapolis, the Minnesota Retailers Association, the Montana Retail Association and the North Dakota Retail Association. Over 50 percent of respondents indicated that prices increased, while 3 percent noted decreases. The survey also showed that sales revenue was up slightly, consistent with national retail sales results. In addition, respondents indicated that employment levels were down slightly and inventories climbed during the second quarter.

The outlook for the third quarter was upbeat, as more than 60 percent of respondents expected sales revenue to increase in the third quarter, while 20 percent anticipated decreases. Product prices were expected to increase, while employment was would remain sluggish. Over 80 percent of respondents expected employment to remain level in the third quarter.

Retailers of apparel, appliances, furniture, gifts and jewelry were among those surveyed.

Below are state summaries for Minnesota, Montana and North Dakota. Due to the relatively low response rate, the margin of error for individual states is notably higher than the three states combined. See methodology for more information.

Minnesota

Retail sales revenue in Minnesota slowed, as 41 percent of respondents reported revenue declines, while 35 percent indicated that revenue rose. Product prices were up as 52 percent of the respondents noted increases, and only 4 percent revealed price declines. Most of the responses from Minnesota indicated no change in employment, but 16 percent saw declines and 8 percent increased employment in the second quarter.

The outlook for Minnesota retailers in the third quarter is a little better, as 57 percent of respondents anticipate higher sales revenue compared with 22 percent who expect falling revenue. About half expect product prices to rise. Employment should remain stable as 89 percent predict level employment compared with 6 percent who expect employment decreases.

Montana

Over half of retail association members in Montana reported higher sales revenue in the second quarter, while 35 percent saw revenue declines. Product prices seem to be rising: 52 percent of the respondents reported increases, and only 4 percent revealed price declines. Most of the responses from Montana indicated no change in employment, but 13 percent noted increases, and 9 percent decreased employment in the second quarter.

The outlook for the third quarter looks similar to the second quarter; 58 percent of respondents anticipate sales revenue increases compared with 25 percent who expect falling revenue. Almost 60 percent predict prices will rise. Employment is expected to fall slightly as 17 percent anticipate employment decreases compared with 9 percent who expect employment increases.

North Dakota

Retail association members in North Dakota were upbeat as half of respondents noted that sales revenue increased in the second quarter, and only 14 percent saw declines. Product prices seem to be rising as 57 percent of the respondents reported increases, while none revealed price decreases. Most of the responses from North Dakota indicated no change in employment and inventories.

The outlook for the third quarter is more upbeat as 79 percent of respondents expect sales revenue to increase; half anticipate rising product prices. Employment could edge up for the North Dakota retailers as 29 percent expect employment will be up compared with 7 percent who expect employment decreases.

Survey Methodology

In early July, the state retail associations sent a postcard size survey to all of their members. The Minnesota and Montana associations sent out, via U.S. mail, 294 and 162 surveys, respectively. The North Dakota association sent out 133 surveys by fax. The North Dakota association also sent out a second fax to all members that did not respond within one week of the first delivery. By July 16, the associations had received a total of 89 surveys (51 for Minnesota, 24 for Montana and 14 for North Dakota ).

Survey results were tabulated for all retail association members. The confidence interval for sampling error was calculated. The 95 percent confidence interval for the table of results for all states combined, Minnesota, Montana and North Dakota are plus or minus 10, 13, 19 and 25 percentage points, respectively. Results are also subject to errors introduced by other factors such as the wording of questions and differences between survey respondents and nonrespondents.